Detailed Information on Wendy’s Initial Franchise Fee, Royalty Fee + 23 Other Fees (Items 5 and 6, 2021 FDD)
1. Application Fee: $5,000
- If you are new to the Wendy’s system, you must sign the Preliminary Letter Agreement attached to the disclosure document and you must pay an Application Fee of $5,000 to help defray some of the costs of processing the application and initial orientation.
- If you are already part of the Wendy’s system, or in other unique, limited instances, Wendy’s may waive the Application Fee.
2. Background Check: $500 for each background investigation
- Wendy’s conducts a background investigation on all individuals who will become a named franchisee, guarantor, or who will own 5% or more ownership interest in a franchisee entity. Wendy’s requires reimbursement for the $500 cost of each background investigation.
3. Technical Assistance Fee: $50,000
- Whether you are new to the Wendy’s system or are an existing Wendy’s franchisee, you must pay a Technical Assistance Fee of $50,000 for each Wendy’s Restaurant at the time the Franchise Agreement is executed.
4. Franchise Development Program Fee: $15,000 to $30,000
- Under the Wendy’s Franchise Development Program (“FDP”), Wendy’s franchisees who build a new Wendy’s Restaurant or remodel an existing Restaurant will have the option of contracting with Wendy’s and/or one of its affiliates as an independent contractor, to perform project management services.
- Under the FDP, you and Wendy’s and/or one of its affiliates must sign the Project Management Agreement, which is attached to the disclosure document. If you remodel your Restaurant, the fee due under the Project Management Agreement, which is known as the “Project Fee,” will be $20,000.
- For new restaurant construction, scrapes and rebuilds, and guts and rebuilds, the Project Fee will be $30,000.
- If your Restaurant is re-imaged with an approved standard refresh design (“Refresh”) or low-cost standard refresh-lite design (“Refresh Lite”), the Project Fee will be $15,000, with additional amounts for more extensive work.
- In addition to the Project Fee, you are responsible for all out-of-pocket expenses incurred by Wendy’s and/or its affiliates on each project, including travel expenses.
5. Real Estate Procurement Program: Real Estate Services Fee of $12,500 and a Transaction Services Fee of $17,500 to cover certain of Wendy’s costs
- Under Wendy’s Real Estate Procurement Program (“REPP”), you may elect to have Wendy’s select and procure for you new Restaurant sites subject to your agreement and approval.
- If you use REPP to obtain such real estate services, which include negotiation of a purchase contract or lease for the Restaurant site, you are required to pay a Real Estate Services Fee of $12,500 and a Transaction Services Fee of $17,500 to cover certain of Wendy’s costs. The Transaction Services Fee shall be refundable until the date on which Wendy’s has approved the proposed site for the development of a new Wendy’s Restaurant.
If you acquire a Wendy’s Restaurant from another franchisee, or from Wendy’s or one of its affiliates
- If you acquire your Wendy’s Restaurant from another franchisee, and Wendy’s consents to the transfer of the Franchise Agreement to you and you are not participating in the Franchise Flip Program, no other initial franchise fee or other initial payment (other than a transfer fee) is required to be paid by you to Wendy’s.
- If you acquire your Wendy’s Restaurant from Wendy’s or one of its affiliates, there may be leasing or financing costs as well as the reimbursement of various other costs due to Wendy’s or its affiliates before opening, as also discussed in Item 10.
- Specifically, these other costs may include Wendy’s Technical Assistance Fee, rent, inventory, working capital, training costs, and other costs associated with opening a Wendy’s Restaurant.
6. Franchise Flip TAF: $20,000
- If you are approved to participate in Wendy’s Franchise Flip program, which involves the sale of Restaurants by an existing franchisee and Wendy’s provision of valuation and deal management services, you will receive a new Franchise Agreement for each Restaurant, which will provide a 20-year term, and you will pay a Franchise Flip TAF of $20,000 for each Restaurant at the time the Franchise Agreement is executed.
7. Royalty: 4% of Gross Sales
- Due Date: On the 15th day of the month.
- “Gross Sales” includes all revenue from the sale of all services and products and all other income of every kind and nature related to the Franchised Business or premises, including proceeds of any business interruption insurance policies, and the sale of any promotional or premium items, whether for cash or credit, and regardless of collection in the case of credit, but shall not include (i) any sales taxes or other taxes collected from customers by you for transmittal to the appropriate taxing authority, (ii) the amount of refunds made to customers, and (iii) any amounts from coupon or discount programs approved by Wendy’s for which you are not reimbursed.
- Gross Sales also excludes revenue you derive from selling, issuing, or increasing the balance on Wendy’s gift cards; however, revenue derived from purchases paid for with gift cards must be included in Gross Sales.
8. National Advertising: 3.50% of Gross Sales
- Due Date: On the 15th day of the month.
9. Local and Regional Advertising: 0.50% of Gross Sales
- Due Date: On the 15th day of the month.
10. Additional Training: will vary under circumstances
- Due Date: As incurred.
11. Transfer: $5,000 minimum. This amount increases based on number of affected restaurants.
- Due Date: Before consummation of transfer.
12. Renewal: an amount which is not greater than 25% of the then-current Technical Assistance Fee
- Due Date: Before expiration of initial term of Franchise Agreement.
13. Audit: costs and expenses of audit, including travel, lodging, wages, accounting and legal costs, and interest on any understated amount
- Due Date: As incurred.
14. Late Fee/Interest: $100, plus interest on the overdue amount from the date it was due until paid, at the (i) rate determined by Quality, or (ii) maximum legal rate, whichever is less
- Due Date: As incurred.
15. Costs and Attorneys’ Fees: will vary
- Due Date: As incurred.
16. Continuous Operations Fees: upon unapproved early termination of the Franchise Agreement, the sum of the average monthly royalty fee and the average Advertising Contribution due under the Agreement for the 12-month period prior to termination (or the average monthly royalty and the average Advertising Contribution due under the Agreement if operating less than 12 months) multiplied by the lesser of (i) 36 or (ii) the number of months remaining on the term of the Franchise Agreement
- Due Date: As incurred.
17. Development Agreement – Development Obligations Fee: only applicable to development agreement. Upon failure to open Restaurant in accordance with development schedule, $5,000 monthly payment beginning in the first month after required open date until earlier of (a) actual open date of Restaurant and (b) 10 years from required open date of Restaurant.
- Due Date: As incurred.
18. Indemnification: will vary
- Due Date: As incurred.
19. Review of Proposed Offering Materials of Franchisee: $10,000 or a greater amount necessary to reimburse Wendy’s for its legal, accounting, and other costs
- Due Date: As incurred.
20. Technology Fee: $6,500 to $12,000 per Restaurant per year
- Due Date: Paid quarterly, upon invoice.
21. Cyber Insurance Policy Premium Payment: a per Restaurant fee of $360, which amount is subject to change on an annual basis according to overall policy premiums
- Due Date: Paid quarterly, upon invoice.
22. In-App Delivery Account Settlement Services: a per transaction fee of 3.5% of each in-app delivery transaction amount
- Due Date: As incurred.
23. Customer Care: a per Restaurant fee of $64 per month
- Due Date: Paid quarterly, upon invoice.
24. FSA Re-Assessment Visit Fee: $152.50
- Due Date: As incurred
25. Rent: varies
- Due Date: Varies.
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